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French private-sector output shrinks amid protests: survey

By
AFP
Issued on 14-12-2018
Modified 14-12-2018 to 10:50

Blockades by yellow vest protestors like this one of an oil depot have pushed business activity into contraction, a key survey has shownAFP/File

A major survey of French private-sector business activity indicated that output shrank in December for the first time in two and a half years, underscoring the economic impact of the "yellow vest" protests that have swept the country.

The influential Flash France Composite Output Index, compiled by research group IHS Markit, showed a sharp decline to 49.3 in December from 54.2 in November, adding to the problems of President Emmanuel Macron.

Any figure below 50 indicates a contraction in activity.

"Prior to the December flash results, survey data suggested that the French economy was set to record a fairly reasonable quarterly expansion in Q4 (the fourth quarter," Eliot Kerr, an economist at IHS Markit, commented.

The "yellow vest" demonstrations began on November 17 in opposition to hikes in fuel taxes, but have since snowballed into broad protests against Macron's pro-business agenda and his style of governing.

Six people have died since the movement began and more than 1,400 injured in the often violent demonstrations by low-income people from small-town and rural France.

Protesters have blocked roads, roundabouts and motorways as well as shopping centres, while fears of demonstrations in many cities have caused shops and restaurants to close.

The weak survey results, if confirmed by other economic data, would compound the budgetary problems faced by Macron's centrist government, which has announced a series of costly concessions to the "yellow vests".

Tax rises on fuel have been cancelled, the minimum wage has been hiked and tax relief has been offered to pensioners in measures estimated to cost around 15 billion euros ($17 billion).

The package is set to be mostly financed by government borrowing, which risks pushing France's public sector budget deficit beyond an upper limit of 3.0 percent of GDP set under EU rules.